DOE seeks clarification on EO nullifying PNOC-Mitra Energy negotiations

The Department of Energy (DOE) will seek clarification from Malacañang on the Executive Order (EO) that nullified the negotiations of state-owned Philippine National Oil Co. (PNOC) with Mitra Energy Ltd. for the development of the Camago-Malampaya Oil Leg (CMOL).

"We will clarify accordingly. We normally discuss how we would implement an EO. We always have close interaction with the PNOC on this matter," Energy Secretary and PNOC chairman Raphael P.M. Lotilla said.

As this developed, PNOC president Eduardo Mañalac denied allegations that he favored the proposal submitted by Mitra Energy because some officials of the said oil exploration firm were his former colleagues in Conoco Philips and China National Oil Companies.

"That is not true. We have implemented a good process and properly selected the right company," he said.

Based on the proposal submitted by the Mitra group to PNOC, production of oil in CMOL will commence before the end of 2007. Mitra Energy said a total of 41 million barrels of oil could be extracted from the reservoir for a period of four years with a total project cost estimated at $684 million.

But sources claimed that Mitra Energy has very limited net worth as of December 2005 of only a million dollar.

At present, service contracts issued by the Department of Energy (DOE) are mostly "farm in" agreements which are entered into on the basis of the financial and technical capabilities of the exploration firms.

In an EO issued recently, President Arroyo revoked Mitra Energy’s contract, saying that "there shall be no farm in or farm out contracts awarded by any government agency, including (PNOC), including contract for the exploration development, and production of crude oil from Camago-Malampaya reservoir."

With the Malacañang decision, PNOC will have to bid out the oil rim project.

Mañalac said they recognized the valid concern of President Arroyo in issuing such order. "We support President Arroyo’s move. The president only wants to make sure that future partners of government agencies, particularly PNOC, will be legitimate and has right financial strength," he said.